CSR Hampered by Lack of Supply Chain, Customer Information

June 1, 2009

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Business executives that are committed to sustainability changes often are unable to accomplish them because of information gaps within their own operations, as well as misunderstandings about the supply chain and customer expectations.

While 87 percent of those surveyed say they have focused CSR efforts to create efficiencies, most are not seeking the sort of information that would optimize efficiencies in the supply chain, waste management and product life cycle, according to a new white paper from IBM Global Business Services.

“We found businesses have positive aspirations, but they’re not collecting the right kind of operational data,” said Jeff Hittner, Corporate Social Responsibility leader at IBM Global Business Services, in an exclusive interview with Environmental Leader.

By and large, executives are not collecting enough data from supply chain partners and they don’t understand what they’re own customers actually want in terms of sustainability information, said Hittner, who is IBM’s lead consultant on CSR issues and co-author of the white paper.

The survey asked executives about the information they collect from suppliers in eight CSR areas: ethical labor standards, product composition, sustainable procurement, waste management, product lifecycle, energy management, water management and carbon management.

“Across all those areas, 29 percent of businesses weren’t collecting any data at all. Nearly eight in 10 companies aren’t collecting information on carbon or water,” Hittner said.

Here is a look at the figures, as well as a look at the percentage of companies communicating with stakeholder groups.

The survey also shows an information gap between what is expected by customers – be they consumers or other business partners.

“It’s not that executives misunderstand their customers’ CSR concerns, it’s that they’ve never tried to find out,” Hittner said. “About 37 percent have never asked their customers what’s important.”

To Hittner, the approach that many companies are taking to sustainability is reminiscent of the developmental atmosphere during the early days of the Internet. “People would come to us and say, ‘Wow. We really need to have a Web site.’ We’d ask what their customers wanted in a Web site and they’d say ‘We don’t know. We only know we need a Web site.’”

While executives’ understanding of customer needs is poor, it is improving, he said. Last year, 76 percent did not understand customer concerns. This year it is 65 percent.

Hittner recommends that companies follow three simple steps to improve in this area.

Perform customer research.
Segment customers from a sustainability standpoint. Understand which ones are most interested in sustainability.
Develop programs that educate and engage customers on sustainability.

“There absolutely is a collaboration component for customers to educate and engage with customers. Tesco is asking their consumers to unwrap the product at the store and throw out unnecessary packaging, then Tesco is going to their suppliers to determine how to reduce packaging,” he said.

With the survey done in the height of the economic downturn, 60 percent found CSR to be more important than last year, and only 6 percent saw it as less important. “That’s impressive and aspirational. But the ability to attain the goals has been frustrated by an information gap,” Hittner said.

Here are some more findings from the report.

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